A Company Issues 9% Bonds with a Par Value of $100,000

question 120

Multiple Choice

A company issues 9% bonds with a par value of $100,000 at par on April 1, which is 4 months after the most recent interest date. The journal entry to record the bond issue includes a:

• A)$100,000 debit to Cash.
• B)$3,000 debit to Interest Expense.
• C)$100,000 credit to Bonds Payable.
• D)$103,000 credit to Bonds Payable.
• E)$3,000 debit to Interest PayablE.$100,000 * .09 * 4/12 year = $3,000 accrued interest

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Definitions:

Required Return

The minimum rate of return that investors expect or require from an investment to make it worthwhile.

Annual Dividend

The total dividend payment a company makes to its shareholders in a year.

Dividend Growth Model

A valuation method used to estimate the value of a stock based on its expected future dividend payments and growth rate.

Dividends

Payments made by a corporation to its shareholders, typically from profits, as a distribution of earnings.